What To Expect From China's August Manufacturing Report

After the HSBC flash
PMI tumbled to 47.5 is August, "a
plainly awful" report according to Societe Generale's Wei
Yao, and official
PMI declined to 50.1 in July, concerns are that the official
number could fall below the contractionary level of 50.

Investors will watch sub-indices like new orders and new export
orders closely as well, for signs of improvement or
deterioration.

Bank of America's Ting Lu expects manufacturing PMI to decline to
49.7 in August, "driven by sub-indices of new orders, output, and
employment".

Chinese stocks have been taking a beating on concerns that
aggressive policy easing is unlikely. But if August data
continues to show deterioration in the economy, it could signal
good news for markets, since it could give policymakers a window
for policy easing and room for reserve requirement ratio cuts in
September and October.

Lu writes, "though we think the scale of policy easing/stimulus
will not be impressive at all, we believe they should be market
positive."